I am a senior editor at Forbes, covering legal affairs, corporate finance, macroeconomics and the occasional sailing story. I was the Southwest Bureau manager for Forbes in Houston from 1999 to 2003, when I returned home to Connecticut for a Knight fellowship at Yale Law School. Before that I worked for Bloomberg Business News in Houston and the late, great Dallas Times Herald and Houston Post. While I am a Chartered Financial Analyst and have a year of law school under my belt, most of what I know about financial journalism, I learned in Texas.

Poker Magnate, London Firm Bankroll Chevron Plaintiffs

An online poker magnate and a publicly traded London firm that specializes in financing corporate litigation are among the investors who have joined the long-running lawsuit against Chevron Corp. over pollution in the Ecuadorian jungle. Their involvement could signal they think a lucrative settlement is at hand, or merely reflect a high-risk gamble on a lawsuit that has thus far consumed more than $7 million in plaintiff expenses to little avail.

The investments are detailed in documents filed in U.S. court in connection with the case. Those documents offer a detailed look inside the workings of a modern, multinational mass-tort lawsuit, including $10,000-a-month public-relations specialists, hundreds of thousands of dollars in air travel and a multi-pronged strategy to apply pressure to Chevron to induce it to settle. One diagram the plaintiffs shared with investors shows the oil company at the center of a ring of “pressure” points including pension funds, state attorneys general, and the Obama administration’s former climate czar, Carol Browner.

According to confidential e-mails and other documents filed with the court, attorney Steven Donziger recruited J. Russell DeLeon, a founder of online-poker firm PartyGaming and a fellow Harvard Law School graduate, to invest at least $1.6 million in the case in exchange for as much as 6% of the anticipated fee, which would be 25%-30% of any settlement.

Also investing, those documents suggest, is Burford Group, a London firm that specializes in financing corporate litigation.

Burford declined comment. An August, 2010 e-mail details the negotiations between Donziger and Burford over a $15 million commitment for which, Donziger says, he made “substantial concessions.” According to one analysis turned over to the court, Burford is entitled to a “preferential return” of $49.9 million it might get even if the settlement is less than $100 million, while its return escalates to $110 million, or seven times investment, in a $2 billion settlement.

An email from Burford’s chief executive, Chris Bogart, filed in court proposes the firm be treated as if it were an actual lawyer in the case, receiving a full payout on its $15 million commitment even if the case settles before Burford actually expends the capital. The firm proposes extending as much as $4 million per six-month period, a condition Donziger says “will interfere with our ability to litigate the case by removing the flexibility to respond effectively to events as they arise.”

Donziger has been pursuing this suit since the mid-1990s, first in the U.S. and then in Ecuador, after Chevron successfully argued the trial should be moved there. He claims to represent thousands of indigenous villagers who he says have suffered illness and death due to oil waste leaking from drilling sites that were operated by Texaco, now a unit of Chevron, in the 1970s and 1980s.

While it originally requested the case be moved to Ecuador, Chevron has since mounted a fierce battle to try and make any judgment unenforceable in the U.S. by digging up evidence to suggest the proceedings are corrupt. The plaintiff lawyers say Chevron has engaged in questionable tactics itself, including hiring operatives to mount a sting operation that caused the first judge in the case to step down.

In addition to DeLeon and Burford, Donziger has also brought in the well-known Washington law firm Patton Boggs and tobacco lawyers Motley Rice.

Donziger spokeswoman Karen Hinton had this to say about the latest release of documents:

“For 17 years the Ecuadorian plaintiffs have been outgunned by Chevron in every respect except one, the evidence. The evidence is all that matters, and it overwhelming proves Chevron’s intentional contamination of the rainforest. With new investments and legal firepower from Patton Boggs and other law firms, the plaintiffs are in a stronger position today than they have ever been.

As part of its litigation strategy, Chevron has sued the plaintiffs in courts around the U.S. to obtain evidence of what it says is fraud in the Ecuador proceedings. A federal judge in New York has ordered Donziger to submit his personal e-mails to the court and earlier ordered the director of the documentary Crude to hand over outtakes showing Donziger and colleagues engaging in frank and sometimes embarrassing discussions about strategy and how to apply pressure to the judge. DeLeon, who lives in Gilbraltar, helped finance Crude.

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